Contractors subpoenaed in Detroit blight-removal investigation

Blight-elimination efforts in Detroit have become the subject of investigations.

Federal investigators have subpoenaed demolition contractors in Detroit's troubled blight-removal program as part of an ongoing investigation, but Mayor Mike Duggan's office has not received a subpoena for records, according to his chief of staff.

"I am aware that subpoenas have been issued, but I'm not at liberty to say who received them," attorney Christian Hauser, a partner with Troy-based law firm Frasco Caponigro Wineman & Scheible, PLLC, told Crain's on Tuesday.

Hauser represents Detroit-based demolition contractor Adamo Group Inc. plus "several other contractors who perform demolition and abatement work for the land bank." Hauser declined to name his other clients.

Duggan's Chief of Staff Alexis Wiley said Tuesday that no one in the mayor's office has received a subpoena from federal investigators.

But Wiley told Crain's the subpoenas have not reached her office or the city building authority.

The Detroit News reported Thursday that a federal grand jury has been empaneled and as many as 30 contractors and city agencies have been subpoenaed for records in an effort to determine whether any of Detroit's $200 million in federal funding for demolitions was misspent. The News cited anonymous sources familiar with the investigation and copies of the subpoenas.

"We have fully cooperated with this investigation from the very beginning and will continue to do so," Wiley said. "The mayor's position always has been that if anyone has done something wrong they should be punished."

Craig Fahle, spokesman for the Detroit Land Bank Authority, said the agency responsible for administering the demolition program also has not been subpoenaed by a federal grand jury.

In May 2016, the federal Office of the Special Inspector General for the Troubled Asset Relief Program subpoenaed the Detroit land bank, its executives and board members for all written and electronic records related to the demolition program, including communication with contractors, according to a copy of the subpoena published on the land bank's website.

"We got subpoenaed last year, and that's the only we've ever received," Fahle told Crain's. "We've been cooperating, and we will continue to do so."

The Detroit Building Authority was also previously subpoenaed by the Office of the Special Inspector General, Wiley said.

Under Duggan's leadership, Detroit's demolition program has been scrutinized by auditors and federal investigators when the cost to demolish a home exceeded $25,000.

Since Duggan took office in 2014, Detroit has knocked down 11,676 blighted structures. The city has 227 upcoming contracted demolitions and an additional 2,141 in the pipeline.

Duggan recently told Crain's that his efforts to speed along the demolitions and have contractors tear down more than 5,000 home per year "got me in a lot of trouble."

"There was a time I was hopeful we could take down 10,000 houses a year. We now know with our contractor capacity, it's just not a practical goal," Duggan said in a May 31 interview at the Mackinac Policy Conference.

Duggan added: "I feel bad for the people who took the grief for it because I pushed them."

The demolition program's contracting and billing practices remain in dispute with the Michigan State Housing Development Authority over contractor billing amid concerns over escalating costs.

In January, Detroit agreed to repay MSHDA $1.3 million after an audit determined some demolition costs exceeded a $25,000-per-house federal cap.

The demolition program was temporarily suspended last August pending a U.S. Treasury review.

Duggan didn't inform members of the Detroit City Council about the suspension until an October news conference in which the Democratic mayor announced changes in protocols to deal with the contracting investigation.

Duggan touted plans to tear down 10,000 more blighted homes in his State of the City address earlier this year and acknowledged the land bank's troubles.

"I put enormous pressure on the land bank to move very, very fast," Duggan said in the speech. "Probably faster than they had controls in place."